Controversy Surrounds New Tax Proposals

Government proposals for changes in the tax code have been criticized by the opposition as shifting the taxation burden from employer to employee.
 
The proposal, discussed in Parliament on June 8, envisages scrapping the 20% social tax, which is presently payable by employers, and replacing it with an increased income tax, which will see employees paying 25%, up from the current 12%.
 
Opposition members have said that the proposal discriminates against ordinary workers, while at the same time giving preferential treatment to employers.
 
However, Vice-Speaker of the Parliament Mikheil Machavariani dismissed such claims, saying that market forces would act to balance out any unfairness inherent in the proposal. He said employers, given the savings that they would make by not having to pay the social tax, would be in a position to offer higher salaries.
 
Regardless of where the tax burden will lie, the exchequer is set to lose GEL 50 million annually with the proposed tax amendment.
 
Another amendment to the tax code will also result in a lower tax take for the government. Profit tax is due to fall from the current 20% to 15%, starting from January, 2008.
 
The measure, presented to Parliament by Finance Minister Lexo Alexishvili in its first reading, will, according to him, result in an annual loss of between GEL 130 and 140 million to the state budget.

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